IMF, G20 Foresee Economic Crash if Carbon Bubble Bursts
It will be “hellishly difficult” but “just about feasible” to reconcile continuing economic growth with deep greenhouse gas reductions, but only “if we make the right choices—and start making them now,” Larry Elliott writes in The Guardian.
Global economic development since the early 1990s has reduced the number of people living below the global poverty line of US$1.25 per day, reduced hunger, made health care and education more widely accessible, and increased the size of the global middle class, Elliott notes. Until now, though, that growth has been powered by a fossil fuel boom that saw China open a new coal plant every two weeks.
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Enter a growing body of research on unburnable carbon, showing that two-thirds to four-fifths of known fossil fuel reserves have to stay in the ground to keep average global warming below 2ºC. “Slowly, those in power are beginning to understand what is at stake,” Elliott writes. “If we carry on growing the global economy at its current rate, and continue to rely on fossil fuels to power that growth, the planet is going to cook.”
The problem is that fossil fuel companies’ stock valuations assume all the reserves they hold will eventually be burned. And now, “the talk at meetings of the International Monetary Fund and the G20 is whether the next financial crash will be caused by the pricking of the carbon bubble,” he states.
“In the unlikely event that investors all pulled out of fossil fuels at once, the result would be much worse than what followed the collapse of Lehman Brothers in September 2008—a colossal stock market crash, followed by an equally epic slump. The Bank of England is sufficiently concerned to have launched an investigation into the risks of this happening.”
That risk “is now out there—and growing—because policy-makers have now woken up to the risks of climate change.”